Defense firms say job warnings loom

Dismayed at a returning Congress still struggling to avert automatic budget cuts, defense contractors could soon alert thousands of employees their jobs are at risk.

The defense industry is gambling that neither Congress nor the White House wants headlines about potential layoffs so close to Election Day — and that the threat of layoff warnings could push lawmakers and President Barack Obama into resolving a budget standoff that has dragged on for more than a year.

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Under the terms of last year’s agreement to raise the debt ceiling, Congress passed, and Obama signed into law, legislation that would automatically “sequester” nearly $500 billion in defense spending over the next decade.

The Pentagon and its vendors have warned that would be catastrophic, but the problem is tied up with the larger deadlock over taxes and spending cuts. And with time running out before the Jan. 2 onset of the sequester, the defense industry is eager to jump-start action by Congress.

The strategy, first broached by defense giant Lockheed Martin, was to argue that sequestration would amount to immediate job cuts, and as such the company had an obligation to notify its employees of the danger under the 1988 WARN Act. Other defense vendors also took notice.

“Unless we receive additional guidance or there’s a solution to sequestration, we feel that we will have to issue WARN notices to some or most of our employees 60 or 90 days before Jan. 2,” said Brian Roehrkasse, vice president of public relations for BAE Systems.

If Congress fails to avert the looming, across-the-board cuts, BAE estimates it could have to eliminate about 10 percent of its U.S. workforce — or about 4,000 jobs, Roehrkasse said.

The notices could go out despite guidance issued in July by the Department of Labor, which said it would be “inappropriate” for vendors to issue layoff warnings given that Congress still had months to avert the onset of the sequester. But the guidance did not say it would be illegal or threaten any penalties — effectively leaving the matter open.

Republican defense advocates, who hope the layoff warnings would amount to a salvo against Obama in the crucial days before the election, blasted the Labor Department guidance.

“To think that one of the agencies of the Obama administration would give guidance not to follow the law of the land — a judge would laugh at that,” said Rep. Buck McKeon (R-Calif.), chairman of the Armed Services Committee.

Meanwhile, Rep. John Kline (R-Minn.), chairman of the Education and the Workforce Committee, sent a letter to the Labor Department, saying its memo was “misleading and incomplete” and requesting documents backing up the decision.

And Sen. Lindsey Graham (R-S.C.) pushed for an amendment to next year’s Pentagon budget that would have required defense contractors to issue WARN notices before the Nov. 6 elections, but the amendment was rejected by the Senate Appropriations Committee.

For its part, Northrop Grumman is “watching the situation closely,” said Randy Belote, a company spokesman.

“We’ll be following the requirements laid out in the law,” he said. “But we’ve made no decisions and have not made any public comments on the issue.”